US oil prices fell over 2 per cent on Monday while price of North Sea oil hit its lowest in eight months. Apache photo.

Oil prices pressured Monday on market sell-off

Oil prices dipped significantly on Monday due to rising US crude output, a weaker physical market, the rising US dollar and pressure from an overall decline across equities and commodities.

By 2:04 p.m. EST, Brent crude prices were down $1.29 to $67.29/barrel. US WTI fell by 2.78 per cent to $63.63/barrel. The Canadian Crude Index dropped $1.61 to sit at $33.93.

According to Reuters, the US jobs report released on Friday showing the fastest wage growth in nearly nine years exacerbated a broader market sell-off. The rising US dollar also hit commodities and oil prices.

“These concerns that are bedevilling the stock market are finding their way into WTI and Brent. But there’s still underlying strength in this market,” John Kilduff, partner at Again Capital LLC told Reuters.

On Friday, Wall Street’s three major indexes reported their biggest weekly losses in two years on the heels of a strong payrolls report. The Dow and S&P 500 reported their worst weeks since early January 2016 and the Nasdaq had its worst week since early February 2016.

“It’s been a long time since the (stock) market has witnessed a 2 to 3 per cent reversal. If this gets extended to say 5 to 6 per cent, sentiment-wise it will probably feel much worse than it actually is,” Semaphore Macro economist Ioan Smith told Reuters.

As well, the physical crude market has deteriorated in the last few weeks. The price of North Sea oil hit its lowest level in eight months and Russian Urals crude was traded at its lowest in a year.

Over the weekend, Saudi Arabia said it cut the official selling prices for crude to its European customers.

Oil demand could also be cut due to scheduled maintenance and turnarounds at oil refineries get underway.

“Naturally, you get (crude) builds on refinery maintenance, but demand is starting to pick up a bit,” John Macaluso, analyst at Tyche Capital Advisors said in an interview with Reuters.

US crude production topped 10 million barrels per day last November, adding to the pressure on oil prices and possibly threatening efforts by OPEC to rebalance the oil market.

On Friday, Baker Hughes reported the US oil rig count had risen for a second straight week, up six to 765.